Harvard Law School Jean Monnet Chair


Legislative Powers of the ECB



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2. Legislative Powers of the ECB

2.1. Independent and Accountable – Independent or Accountable?

ECB has the power to make regulations, take decisions, make recommendations and deliver opinions to the extent necessary to implement its tasks and carry out its responsibilities within its area of competence, monetary policy.18 The ECB is also entitled to impose fines or periodic penalty payments on undertakings for failure to comply with obligations stemming from its regulations and decisions. 19 The regulations and decisions enacted by the ECB enjoy the status of Community law and may be invoked by interested parties in national courts assuming that the conditions for direct effect are met.

Article 34.1 of the Statute has been formulated in the same manner as Article 249 EC establishing the legislative powers of the Council the difference being that Article 34.1 does not mention directives. Unlike Article 249, Article 43.1 also defines the field in which regulatory power can be implemented.20 The list of different types of norms the ECB can adopt demonstrates political will to restrict its regulatory power, on the one hand, and the rather large extent of its competence, on the other, considering that the Bank is able to adopt directly applicable legal acts.21 In most cases, however, the ECB is only able to implement its powers in individual cases within the limits set by the EC Treaty and further defined by the Council.22 The Bank can decide to publish its decisions, recommendations and opinions,23 which should be encouraged in order to increase transparency. The ECJ has declared on several occasions24 that Article 249 is not exhaustive and established that EC organs can adopt additional acts to those mentioned therein. The Court is likely to implement Article 34 in a similar manner.25

The difference between the legislative competence of the ECB and that otherwise implemented within the Community is that the Bank uses its powers independently from the other EC organs and national parliaments.26 The basis for the inter-institutional relations of the Bank is Article 108 EC which establishes that neither the ESCB, the ECB, or a national central bank nor any member of their decision-making bodies, shall seek or take instructions from Community institutions, governments or any other bodies.27 Thus, the Bank has a wide margin of appreciation when it comes to judging between different monetary policy measure alternatives.28 This is motivated by the need to make monetary policy decisions in the interests of the whole of the Monetary Union. The ECJ has, nevertheless, jurisdiction to review the legality of the acts of the ECB on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the EC Treaty or misuse of powers.29

Article 113 EC places the leadership of the Bank under some obligations to report to the other EC organs.30 Thus, according to Snyder, the accountability of the ECB stems less from the (limited) extent to which it is directly answerable to the Community’s political institutions or national governments than from the fact that the Bank is locked into a relatively complex institutional structure and set of inter-institutional relations.31 Goodhart states, however, that the reports of the ECB are only examples of ex-post justification and without a clear Treaty-based definition of price stability it is hard to hold the ECB accountable for its actions. Subsequently, it is almost impossible for outsiders to demonstrate that the ESBC is mistaken in its judgements, reflecting that the System is carefully protected against any criticism by its independence.32

In the last instance National Parliaments are responsible for the provisions in the Treaty regulating the competence of the Bank. In other words, the ‘rules of the game’ are decided upon according to traditional democratic procedures at the national level, but the ‘game’ is delegated to the Central Bank, and since national parliaments are in a position to alter the legislation, the ECB remains under their ultimate control.33 Article 108 EC establishes that the ECB shall not seek or take instructions from any government of a Member State.34 This means that the ECB is independent in relation to political decision-making both at the European and at national levels. Subsequently, the fundamental problem with the Bank’s political independence is the discrepancy between those defending its independent status and those demanding greater legitimacy and stricter arrangements to guarantee the Bank’s accountability. In many observers’ opinion there is a fundamental trade-off between central bank independence and accountability, in that pure independence rules out accountability and substantial accountability rules out independence.35

Monetary policy in the traditional, national sense includes balancing the parliament and the government on the one hand and the central bank on the other.36 In the Union the Central Bank has no equivalent counterpart. The independence of the ECB is further strengthened by the fact that it does not interact with just one but several national governments which also means that political pressure remains weaker than in a national environment.37 It is practical for the members of the Executive Board that both the objective and accountability of the ESCB have been left blurred and fuzzy as the solution leaves a wide margin of appreciation. But for the rest Goodhart suggests that part of the Treaty and the Protocol is deficient. 38

Even if the ECB’s policies based on price stability proved profitable for all members of the society this would not frustrate the need to consider the relationship between the implementation of the Bank’s powers and democracy39 as a way to create greater legitimacy. The same question applies to the effect of the Bank’s law-making powers in relation to the rights of individuals. The need is further strengthened by the fact that the ECB has in some cases, when allowed to choose its own strategy, sacrificed some accountability in exchange for other gains.40 Focusing on democracy and accountability as a matter of principle means that the true impact of the ECB’s acts is of minor importance. Thus, assuming that legitimacy can be established only through profitable results requires less from the other categories of legitimacy, namely procedural and substantive.41



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